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Evening markets: crops feed on improved market sentiment

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Bulls, for once, felt the sun on their cheeks, with agricultural commodities joining other risk assets in closing higher, despite the eurozone providing fresh reason for doubt.

Not only did the International Monetary Fund deny earlier, well-received, reports that it was preparing a plan to prop up Italy, but Moody's won, hands down, the daily battle between ratings agency to out-glum each other, saying that "the probability of multiple defaults by euro area countries is no longer negligible".

Still, with a Belgian sovereign debt issue finding buyers and, in the US, shoppers setting a record for their post-Thanksgiving shopping spree on (so-called Black) Friday, market moves remained upward.

After all, as Darrell Holaday at Country Futures noted, "there is a lot of money on the sidelines that is earning nothing in interest and it could come into the commodity market if the concerns over Europe subside for awhile".

Benson Quinn Commodities flagged "talk that funds could be back in the market as November ends and December starts".

'Perfect conditions for a rally'

At GrainAnalayst.com, trader Matthew Pierce was more forthrightly bullish.

"I will stand up and say it loudly. The conditions right now for a rally in

corn

are almost perfect in my eyes," he said.

"The growing conditions in the southern hemisphere support soybeans more than corn right now, and with the continual acreage shifts I have heard about in Brazil and Argentina there is little reason in my mind to pressure corn any more."

Others were broadly behind him, if flagging different reasons, notably the strength in US cash prices for corn.

Paul Georgy at broker Allendale said that "basis in most areas is well above normal.

"Historically the strongest basis occurs in early December when harvest is complete and farmers lock the bin doors until the New Year," with demand likely to prove especially firm this year, given the likely expiry at the close of the year of ethanol blenders' credits.

Short squeeze ahead?

Mr Holaday suspected that the end of this week could throw up a bullish factor in favour of corn, after Wednesday brings first delivery notice day for December corn, and the start of the expiry process.

"We feel there is a chance there will be a short squeeze in the December contract, as basis levels near the delivery point indicate that the longs will set back and wait for delivery," he said.

Investors with short positions felt a little heat on Monday, anyway, with the December contract closing up 1.6% at $5.91 ¾ a bushel, and the better-traded March lot adding 0.7% to $5.98 ½ a bushel.

Currency factor

That provided some support for Chicago

wheat

, but the grain lacked such as convincing bullish story, with fundamentals going for it, such as Ukraine dryness and Australian inundations, already being in investors' equations.

The March contract gained 0.7% at $5.93 a bushel, rebounding from a 16-month low for a nearest-but-one contract.

And Paris wheat fell, facing the headwind of a stronger euro, which gained on the better eurozone sentiment, making the region's exports less competitive.

Paris wheat for January lost 0.4% to E180.25 a tonne.

London wheat for May got more into the bullish spirit, adding 0.2% to £144.75 a tonne, helped by a pound which, like the

dollar

, lost ground.

(The greenback shed 0.6% against a basket of currencies as investors eschewed a favoured safe haven.

Shares

, meanwhile, stood 2.4% higher in late deals in Wall Street, after closing up 2.9% in London and 4.6% in Frankfurt.)

'Dry pockets developing'

Soybeans

showed better how gains should be made, adding 1.2% to $112.21 a bushel for the benchmark January contract, helped by another Chinese forecast, from the Ministry of Commerce, of strong imports of the oilseed, besides some South American weather worries.

Benson Quinn said that "dry pockets are starting to develop in north west Argentina," rattling nerves in this, a La Nina year.

Mr Pierce noted a "small issue in Argentina with the central region drying out over the next 11-15 days with no real break seen".

'Screaming for a bounce'

The better macroeconomic conditions worked to boost many soft commodities too, with raw

sugar

for March closing up 1.0% at 23.12 cents a pound in New York.

Weak data on production in Brazil's key Centre South region helped the sweetener's bullish cause, besides questions from Czarnikow over upbeat ideas on Indian exports.

And New York

cotton

continued to see some benefits from Friday's firm US export data, adding 0.5% 5o 91.30 cent a pound for December and 91.35 cents a pound for March.

However

cocoa

failed to hold on to early gains, setting a fresh three-year low (for a spot contract) of £1,485 a tonne for December delivery, before ending at £1,488 a tonne, down 1.5% on the day.

The better-traded March lot dropped 1.4% to £1,516 a tonne.

"The precipitous drop in cocoa prices had been screaming for a technical bounce," softs trader Jurgens Bauer said.

But not on Monday, at least.

By Agrimoney.com

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